Startups often need to fire or layoff employees quickly – bad fit, high burn or lack of funds. For this reason the popular mantra “Hire Slow, Fire Fast” is associated with the startup community. But while there is a proliferation of articles and posts supporting or opposing the well-known adage, there are few resources available to start-ups on how to actually “fire fast” and what to do after a downsizing.
Research suggests that a bad hire alone can cost a company at least $25,000 and that an average settlement for a wrongful termination is around $40,000. These costs can put a growing company in a pinch, and can be avoided by following these 5 best practices to ensure a smooth transition after the restructuring decisions are made and the planning is complete:
Honestly discuss the current situation: The first step when firing or downsizing is to ask management teams to have an honest discussion with the employee(s). HR teams should be involved as necessary to communicate the transition steps. But as employees are usually loyal to their managers, hearing the tough news from them is better than assigning the task to an outsider. While one-on-one conversation is advised, sometimes it is not possible or feasible. In such cases, managers can organize a meeting with their staff and announce the news through the protocol provided by HR. It is also important to agree on the terms of the departure announcement with the affected employee(s), and then delegate responsibilities to other staff as needed.
Communicate openly about future plans: Organizational changes are difficult for both the exiting and remaining employees. Open communication is essential as staff can struggle with uncertainty about their future and have difficulty coping with emotions and changes, especially during a layoff. Management should always be available to answer questions and offer help during a downsizing. But the road doesn’t end there. Leaders need to continually follow up with their teams afterward to promptly address any remaining or new issues.
Complete the essential tasks: While they can seem tedious, organizations have to make sure that all the HR tasks are completed for a proper reduction in force. Having an exit checklist can help both the companies and employees stay organized during a hectic time. Collecting company equipment, conducting exit interviews, and arranging to continue employee benefits are just some of the tasks. The employee exit checklist can vary significantly based on the employee’s role and position.
Support the exiting employees: It is common practice to support outbound employees to build employee loyalty, save your brand, and avoid legal woes. Support should be provided in both cases – firing or restructuring. Outplacement support is a standard employee benefit provided by most companies to their exiting employees. It can reduce the emotional burden and the time it takes to find the next job for former staff. It is also a low-cost option for startups that can’t afford to give hefty severance packages. Depending on the nature of the departure, leaders and managers can also introduce employees to companies in their network.
Build a community for remaining staff: Open communication and clear transition plans can help surviving employees after a restructuring. However, it can still be a tough time for staff missing their old colleagues to juggle new responsibilities. This can hamper team morale as well as office productivity. Team bonding activities and surveys can help build a sense of community and make employees feel empowered. Depending on the circumstances, companies can even encourage online alumni communities for employees to connect and network.
We have all read horror stories of CEOs announcing a layoff before management teams are informed and heard about shocked employees coming to an office with empty cubicles and lack of direction because a startup had to fire or downsize quickly. While this need for startups to “fire fast” will not go away, following HR best practices on organizational change and restructuring can minimize damages. After all, how employee transition and outplacement is handled is a telling sign of a startup’s leadership and health, and can not only have a serious impact on a company’s brand and employee loyalty but can also create legal woes with long-term consequences for a growing company.
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